TAX CUTS WORKED AND COULD AGAIN

Your Jan. 10 editorial ignores history when you assert that President Bush's "tax cut plan doesn't make sense [because it] comes at a time when the federal budget is already bleeding red ink." The three prior substantial tax rate cuts during the Coolidge, Kennedy and Reagan administrations all occurred during periods of recession. I specify tax rate cuts, not tax cuts, because tax revenues can increase, not decrease, after a cut. The results of the cuts in each case were significantly improved, strong economies and increased tax collections.

Why did the economics then eventually falter? Because of undisciplined spending by the government.

President Kennedy's tax rate cuts amounted to about 2 percent and Reagan's 3 percent of gross domestic product, and it will be about 1.5 percent with the added proposed $674 billion to Bush's previous cut. Lyndon Johnson's "Great Society" programs increased government spending from 17.1 percent of gross domestic product to 23 percent.

After Reagan's cuts, tax collections increased an average 7.25 percent per year. Again, overspending created large deficits, although much of it was to beef up our depleted military, which resulted in the breakup of the Soviet Union and the end of the Cold War.

Also, the vastly improved business climate provided the impetus for, at that time, small entrepreneurial companies such as Dell Computer, Wal-Mart, Microsoft, Home Depot, etc., to gear up and lead us into the boom of the '90s. (It also led to the "irrational exuberance" of the financial markets, which couldn't be sustained, and the out-of-control spending by the government, which helped tank the economy.)

You assert that presumed "growing deficits must force Congress to pause and examine a large tax cut that is sure to deepen that deficit in the foreseeable future."

How about if members of Congress were held accountable the same way business officers are? If members of Congress were to cook the books, cheat, steal and waste our money shamelessly, they should be fined, fired and jailed.

Regarding "across-the-board tax cuts are not evenly weighted among all tax-paying classes," Americans for Fair Taxation has a solution. This is a nonprofit organization that advocates the elimination of all federal income taxes on individuals and businesses. A simple federal retail sales tax on new goods and services would provide the same tax revenues as under the present complicated income tax. It would benefit all income classes, even the lowest, who pay only payroll taxes, which would be eliminated.

The cost of goods and services would decline because businesses could pass on their savings resulting from the elimination of income and payroll taxes and their share of the $250 billion to $300 billion cost of compliance per year under the present tax code.

I think the biggest problem if a sales tax replaced the income tax would be the elimination of the phony class-warfare argument. The liberal demagogues would sorely miss bloviating about class inequities. The more affluent would spend more and pay more in taxes, but everyone would pay at the same rate and have control via their spending habits of how much tax they would pay. I urge your readers to go online to www.fairtax.org for further information regarding this proposal.